State v. Franklin County Sav. Bank & Trust Co.

• Decision Date: 03 March 1902
• Citation: 52 A. 1069,74 Vt. 246
• Court: Vermont Supreme Court
• Parties: STATE v. FRANKLIN COUNTY SAV. BANK & TRUST CO.

52 A. 1069

74 Vt. 246

STATE

v. FRANKLIN COUNTY SAV. BANK & TRUST CO.

Supreme Court of Vermont. Caledonia.

March 3, 1902.

Exceptions from Caledonia county court; Munson, Judge.

Action for taxes in behalf of the state by prosecution of the commissioner of state taxes against the Franklin County Savings Bank & Trust Company. From a pro forma judgment for the plaintiff on an agreed statement of facts, the defendant brings exceptions. Affirmed.

Argued before TAFT, C. J., and ROWELL, TYLER, MUNSON, START, WATSON, and STAFFORD, JJ.

J. E. Cushman, for the State.

Jonathan Ross, for defendant.

WATSON, J. The defendant is a corporation with capital stock, organized under a special charter (Laws 1898, No. 220). The corporation has the power, among other things, "to receive moneys on deposit or in trust at such rate of interest or on such terms as may be agreed upon, the rate of interest to be allowed for the deposit not to exceed the legal rate." The defendant keeps deposits for savings and investment, for which it issues books of deposit containing certain rules and regulations touching such deposits. In addition thereto it keeps with business men commercial deposits, which are strictly business accounts, such as are kept by national banks. Such deposits are subject to be withdrawn at sight, and the depositor receives no interest thereon. Usually the defendant gives the depositor a pass book on which it enters the credit and debit sides of the account, and no more; and it usually renders him a monthly statement of his account, accompanied by the checks drawn against it during the month.

Every savings bank and trust company incorporated in this state and doing business herein is required to pay a tax to the state under the provisions of V. S. 583, 584, as amended by Laws 1896, No. 18, § 2. The law reads:

"Sec. 583. Every trust company or savings bank and trust company incorporated by this state, and doing business herein, shall pay a tax to the state treasurer, which is hereby assessed at the rate of seven-tenths of one per cent. annually, upon the average amount of its deposits, including money or securities received as trustee under order of court or otherwise, deducting therefrom the average amount, not exceeding ten per cent of its assets, invested in United States government bonds, and, also, the amount, if any, of individual deposits in excess of fifteen hundred dollars each, listed to the depositors in towns of this state where such depositors reside.

"Sec. 584. The taxes assessed by the two preceding sections shall be paid semi-annually, one-half in the month of February and one-half in the month of August, and shall be based upon the returns for the six months terminating with the last day of December and June next preceding. No other tax shall be assessed upon such deposits or accumulations in savings banks, or on such deposits in trust companies, and savings banks and trust companies, nor against the depositors on account thereof, except individual deposits exceeding in the aggregate fifteen hundred dollars."

The defendant made due return of the average amount of all its deposits for the six months ending the last day of June, 1901. This return includes $42,308.24 as the average amount of commercial deposits. The defendant has paid the tax assessed on all its deposits, except the commercial, which it claims are taxable to the depositors. The tax on such deposits, with interest, is $151.40, and to collect the same this suit is brought.

That the tax required to be paid by sections 583 and 584 is a franchise tax was decided in the case of State v. Bradford Sav. Bank & Trust Co., 71 Vt. 234, 44 Atl. 349. Such a tax is upon the privilege of conducting the business under a corporate organization. Cooley, Tax'n, 34. The amount to be paid on franchises of any class may be ascertained upon such basis as the legislature shall determine; but it was said by the federal supreme court in Society v. Coite, 6 Wall. 594, 18 L. Ed. 897, speaking through Mr. Justice Clifford, that experience shows that to ascertain the amount in some mode by the amount of business which the corporation shall transact within a specified period is better calculated to effect justice among corporations required to contribute to the public burdens than any other which has been devised.

It is contended in behalf of the defendant that its powers are so limited by the charter and the general statutory provisions applicable to savings banks and trust companies that it is not authorized to receive commercial deposits, and therefore the word "deposit," as used in the provision of the charter before quested, does not have reference to such deposits, but refers solely to deposits for savings, or such as are interest-bearing; and that the word "deposit," as used in sections 583 and 584, does not include commercial deposits as a basis for taxation. In effect this is a contention by the defendant that its deposits, to the extent of over $42,000, pertain to and are the result of a business ultra vires the corporation, and therefore not a basis for such taxation within the law. If this contention were sound, the question whether the defendant could take advantage of its own wrong thus to avoid taxation might properly arise. But we do not think the defendant's powers are thus limited. Under the provisions of the charter, the rate of interest and the terms on which the defendant may agree to receive moneys on deposit or in trust are within its discretion, except that the rate of Interest allowed on deposits shall not exceed the legal rate. The language used is broad enough to permit the receipt of money on deposit upon terms as to interest from the legal rate down to without interest, and upon such terms regarding payment as the parties may expressly or impliedly agree. The interest may be at a special rate, and the deposit subject to drafts or checks drawn against it payable at sight; or the deposit may be without interest, and payable in drafts or checks in the same way. In fact, generally, when a bank receives ordinary deposits, it impliedly contracts with the depositor to discharge the indebted ness by honoring such checks as he may draw against it. Janin v. Bank, 92 Cal. 14, 27 Pac. 1100, 14 L. R. A. 320, 27 Am. St. Rep. 82; Bank v. Risley, 111 U. S. 125, 4 Sup. Ct. 322, 28 L. Ed. 374. Mr. Morse defines a bank as "an institution, usually incorporated, with power to issue its promissory notes intended to circulate as money (known as bank notes); or to receive the money of others on general deposit, to form a joint fund that shall lie used by the institution for its own benefit, for one or more of the purposes of making temporary loans and discounts, of dealing in notes, foreign and domestic bills of exchange, coin, bullion, credits, and the remission of money; or with both these powers, and with the privileges, in addition to these basic powers, of receiving special deposits, and making collections for the holders of negotiable paper, if the institution sees fit to engage in such business. Generally the bank must hold itself ready at any time to pay the amount of a deposit to the depositor or his order, but this may be varied by agreement (as to give one or more days' notice, or not to draw for a certain time, or to leave always a certain sum to the depositor's credit), and is not an essential to the definition." 1 Morse, Banks, 2. See, also, Bouv. Diet., and Oulton v. Society, 17 Wall. 109, 21 L. Ed. 618.

By its charter the defendant may receive deposits, may issue letters of credit, purchase and sell stocks, bonds, mortgages, and other evidences of indebtedness; and in section 16 the right to discount bills of exchange, business and commercial paper, is expressly recognized. In addition thereto are the other powers explicitly granted by the charter and by the general statutory laws applicable to such Institutions, and its implied powers. Under the provisions of V. S. c. 173, banks of circulation, discount, and deposit may be organized. Therein it is provided that all banking associations organized thereunder shall be banks of discount and deposit, as well as circulation, and may carry on the business of banking by discounting bills, notes, and other evidences of debt, receiving deposits, buying and selling gold and silver bullion, foreign coin, and bills of exchange, loaning money on real and personal security, and exercise such incidental powers as are necessary to carry on such business. It will be noted that, as a bank of discount and deposit, its express powers are included within the powers of the defendant under its charter and the general statutory provisions, except in buying and selling gold and silver bullion, foreign coin, and bills of exchange, which exceptions are not essential to the character of the bank. It is a matter of history, of which the court will take judicial notice, that prior to the passage of the national banking act in February, 1863, banks of circulation, discount, and deposit, organized under the laws of this state,...